Primary Risks

Compliance risk can occur when a credit union fails to implement the necessary controls to comply with appropriate consumer financial protection laws and regulations. Compliance risk potentially exposes a credit union to fines, civil money penalties, payment of damages, and the voiding of contracts.

Reputation risk can occur when a credit union experiences poor publicity after failing to comply with the appropriate consumer financial protection laws and regulations. It can result in risk to earnings or net worth arising from potential fines, negative public opinion or perception, diminished reputation, and reduced potential to expand the field of membership.

Strategic risk can occur when management fails to perform adequate planning and due diligence regarding consumer financial protection laws and regulations.

Both reputation and strategic risk are a concern when there is noncompliance with consumer financial protection laws and regulations. This may expose a credit union to fines, civil money penalties, lawsuits, legal damages, and unenforceable contracts, which could have a significant, negative financial impact. If a credit union does not have an adequate CMS and violations are identified, the credit union may be required to reimburse members (to make them whole) and may also be subject to financial penalties.

For more information on risk categories, see Letter to FCUs 02-FCU-09, Risk-Focused Examination Program0 and the Risk-Focused Examination section of the Examiner’s Guide.

Last updated on June 05, 2023